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Australia recession not likely: Treasury

Treasury Secretary Ken Henry does not believe Australia would follow the United States into a recession if that country follows a marked slowdown after the US sub-prime market crisis.

However, Mr Henry, who was chairing a Melbourne Institute economic forum in Canberra, ducked a question on whether federal Treasurer Peter Costello would make a good prime minister, saying his comments were unlikely to be helpful.

The fall-out from the US sub-prime market is being felt across the globe through volatile financial markets, and there was an early sign of the US economy slowing down on Friday with an unexpected fall in US employment.

However, Mr Henry said past US recessions had resulted in Australia following suit, but the local economy was now much more resilient.

"I don't think that that is any longer the case," he said.

"The last time the US went into recession (following the post-tech boom), Australia did not."

He said the US economy was still important, but the Australian economy was now supported by the strength of commodity prices and the profitability of the resource sector.